The importance of exchanges in the Defi world.
Imagine an economy where every company had its own currency. In this world if you worked for apple you would be paid in APLs. If you invest in Apple you would be given APL tokens in exchange for your investment.
If you wanted to buy and IPhone you would have to pay in you guessed it APLs. The entire Apple Ecosystem in fact would work on the APL token. Users could keep these tokens effectively becoming investors in their favorite company. If they are real enthusiasts they can open a store front for APL or use their tokens as an investment in some manufacturing equipment so that they could manufacture some small part of the latest IPhone. You could also pool your APLs with a group of friends to buy the rights to setup the factory. You would have to produce the product to the appropriate quality standards and if you did not you would slowly lose your parts of your stake untill you would not be allowed to manufacture anymore. Now imagine that by running this screen manufacturing factory or the IStore in NYC you will automatically be paid out a portion of all earnings in APL from all customers who purchased the latest IPhone. All of this works on programmable executable agreements that need the majority of the holders of APL’s to agree to any change on how APLs are distributed amongst the players. Imagine when a new IPhone is about to be launched and new factories all over the world are needed to be upgraded and enhanced to deliver enough of the new IPhone XX. Imagine that the intelligence of the game mechanics (tokenomics) is so well evolved that the amount of APLs being distributed to new manufacturers will automatically increase so that new capacity is built. Imagine if the resultant price of the new IPhone is continually being updated based on the supply and demand for the IPhone on a moment by moment basis. Imagine how self organising self correcting and self learning a system like this would be. A key employee stops doing some critical work for a few days and the price for doing this work dynamically rises to attract and reward someone else for doing it. All these automatically executing contracts and tokenomics eleminate the need for central control via management but not centralised leadership where inspiring leadership acts as a strange attractor in the midst of all this complexity attracting the most creative people to their projects to create the next world changing technology. A leader who has no authority over anyone in a team of volunteers working for apple to become successful because they hold so many APLs.
I have just described how Apple would work if it was a crypto startup.
Now imagine that an employee of Apple wants to save part of their salary and they had a perfect store of value they could save whatever they wanted into this store of value knowing that it could never be manipulated, never be devalued and for which the rules of the game will never be changed by any central authority blindly fiddling with the financial levers wrecking peoples lives while trying to win the next democratic election. Welcome to the true value proposition of bitcoin.
Imagine now that the employee also needs some things other than just APL tokens e.g. She might need some food. So she goes of to the earthlife store. She select1s all her regenerative agriculture products and moves to the checkout. The only problem is that Earth Life wants her to pay 500 ELFs and all she has is a phone full of APLs. Since Earth life wants her to buy their products and she wants their products, she swipes her phone to authorise a transaction. 500 ELFs worth of your APL’s are instantly exchanged at the exact current market price and EarthLife are paid in ELFs she pays in APLs. Now behind the scenes an entirely different decentralised payment network is doing its thing. She is charged a small fee for the exchange. The people who created the exchange protocol are paid by you in SWAPs, some of these SWAPs are paid to the people providing liquidity pools so that Earth Life can be paid in ELFs and the person who 1has given his/her agreement to accept the APLs are paid some SWAPs. The amount of SWAPs being offered is changing continually based on supply and demand APLs and ELFs.
What I have just described for you is how all the projects and protocols are organised and how the Decentralised exchanges work.